The current Stamp Duty Holiday comes to an end in a little over two months. And there is a growing call from across the property industry for the Chancellor to extend it.
Removing the property tax from homes under £500,000 has been a shot in the arm for the market. While Covid-19 brought a sudden halt last March, the market was already slowing down ahead of it.
For many people, staying put before the holiday was the only option as the tax over-stretched their finances. Whilst they could afford the mortgage on their new home, and even covering the cost moving, finding the extra cash for Stamp Duty was a stretch too far.
Prior to the holiday, anyone buying a new home over £125,000 had to find funds to pay the treasury to cover the price of moving. The percentage increases at the next threshold of £250,000). Of course, there was a higher threshold for first-time buyers, but it still often put off next-time movers.
The average house price in the UK is £256,000 and these are not exactly vast mansions, but everyday homes for average-sized families. So, the Stamp Duty Holiday gave many of those who were outgrowing their home the chance to move. It is no surprise, therefore, that the market picked up the way it did at the end of 2020.
But with the deadline looming and delays due to Covid-19 and further lockdowns, it means many could miss out! Even if someone has had their mortgage approved and started the buying process in the past few weeks, there is a chance the deal will not meet the deadline.
Throw in the fact that anyone in the chain (including solicitors, surveyors, etc.) may have to self-isolate, it could lead to unexpected delays. As a result, a buyer will have to find extra cash to pay the tax through no fault of their own.
Stamp Duty ‘chaos’?
As TV property expert Phil Spencer said last week, the finite deadline could release ‘chaos’ and ‘mayhem’. With everyone working to the date, he believes it will create major issues if sales are not completed in time.
He said in a radio interview, “It’s great to keep people motivated towards that day. But actually, if they haven’t completed their deals on that date, the chances are that deals will be collapsing left right and centre. It will just be bedlam.”
The last thing anyone wants is to see deals collapse because the knock-on effect in the chain will be devastating. From the first-time buyers at the bottom of the chain to those downsizing at the top.
To help reduce the risk of the market being thrown into chaos, extending the Stamp Duty Holiday for those who have started the buying process would help.
Research by property magazine Property Reporter says there is an ‘overwhelming demand’ and mounting pressure on the government to do this. We would certainly agree!
So many buyers will spend money on legal advice, searches, surveys and arrangement fees over the next couple of months only to find they can’t complete in time. A house currently Sold Subject to Contact (STC) could then end up back on the market on 1 April! That will be emotionally devastating for both buyer and vendor; but the buyer will also end up with less money to spend in future as they have already paid fees.
Buyers are already beginning to retreat, and house builder Persimmon is reporting a slowdown in sales as the deadline gets nearer.
A petition calling on the Government to extend the holiday has surpassed the 100,000 signatures. This means the issue will be considered for debate in Parliament.
We would add our support to the debate because we believe an extension is necessary to keep the market moving. Certainly, allowing those who have had offers accepted should qualify for the tax break at the very least.
Like Phil Spencer, we agree that a clear deadline and strict cut-off date is not the answer.
We recognise that this tax adds coffers to the public purse, but it is unfair on all those who are so close to completing having to rethink due to circumstances outside their control.
If you want to talk about your mortgage, contact the mortgage team today.